Laxmi Civil Engineering Service P. Ltd,, Kolhapur v. Addl CIT Rg- 2 Kolhapur, Kolhapur

ITA 1751/PUN/2012 | 2007-2008
Pronouncement Date: 30-10-2013 | Result: Allowed

Appeal Details

RSA Number 175124514 RSA 2012
Assessee PAN AAACL5602N
Bench Pune
Appeal Number ITA 1751/PUN/2012
Duration Of Justice 1 year(s) 2 month(s)
Appellant Laxmi Civil Engineering Service P. Ltd,, Kolhapur
Respondent Addl CIT Rg- 2 Kolhapur, Kolhapur
Appeal Type Income Tax Appeal
Pronouncement Date 30-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-10-2013
Date Of Final Hearing 18-09-2013
Next Hearing Date 18-09-2013
Assessment Year 2007-2008
Appeal Filed On 30-08-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE: SHRI G. S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO. 1748/ P N/ 20 1 2 ASSESSMENT YEAR : 200 7 - 08 ASSTT. COMMISSIONER OF INCOME TAX (CENTRAL) CIRCLE KOLHAPUR VS. LAXMI CIVIL ENGG. SERVICES PVT. LTD. 1148 - E SYKES EXTENSION KOLHAPUR (APPELLANT) (RESPONDENT) PAN NO. AAACL5602N ITA NO. 1751 /PN/20 12 ASSESSMENT YEAR : 2007 - 08 LAXMI CIVIL ENGG. SERVICES PVT. LTD. 1148 - E SYK ES EXTENSION KOLHAPUR VS. A DDL. COMMISSIONER OF INCOME TAX RANGE - 2 KOLHAPUR (RESPONDENT) (APPELLANT) PAN NO. AAACL5602N A SSESSEE BY: SHRI M.K. KULKARNI RE VENUE BY: SHRI RAJIB JAIN DATE OF HEARING : 1 8 - 0 9 - 2013 DATE OF PRONOUNCEMENT : 30 - 10 - 2013 ORDER P ER R.S. PADVEKAR JM : - THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND ANOTHER BY THE REVENUE ARE FILED CHALLENGING THE IMPUGNED ORDERS OF THE LD. CIT(A) KOLHAPUR DATED 21 - 06 - 2012 FOR THE A.Y. 200 7 - 08 . WE FIRST TAKE THE REVENUES APPEAL FOR DISPOSAL. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL: 1. THE CIT(A) HAS ERRED IN LAW AND FACTS AND CIRCUMSTANCES OF THE CASE HOLDING THE ASSESSEE AS ELIGIBLE FOR DEDUCTION U/S.80IA(4) OF THE ACT. 2 ITA NOS. 1748 & 1751/PN/2012 LAXMI CIVIL ENGG. SERVICES PVT. LTD. KOLHAPUR 2. THE CIT(A) HAS ERRED BY DEVIATING FR OM HIS OWN ORDER IN THE SAME CASE FOR EARLIER YEARS WHEREIN HE HAS UPHELD THE ORDER OF AO REJECTING CLAIM OF DEDUCTION. 3. THE CIT(A) HAS ERRED IN FACTS CONSIDERING 'DEVELOPER' AND 'CONTRACTOR' AS SYNONYMS. 4. THE CIT(A) HAS ERRED IN FACTS RELYING ON A DECISION IN THE CASE OF ABG HEAVY ENGINEERING WHICH IS NOT APPLICABLE IN THE PRESENT CASE. 5. THE CIT(A) HAS ERRED IN FACTS IN IGNORING THE INSTRUCTION NO.3 OF 2008 GIVING CLARIFICATION IN RESPECT OF THE PROVISIONS OF THE FINANCE ACT 2007 WHEREIN CLARIFICATION IN RES PECT OF 'DEVELOPER AND CONTRACTOR' IS ALSO GIVEN. IT IS SPECIFICALLY STATED THAT CONTRACTOR IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IA(4) OF THE ACT. 6. THE CIT(A)'S HAS ERRED IN FACTS IN DELETING THE ADDITIONS MADE UNDER SECTION 14A OF THE IT ACT IGNORING THE F ACTS THAT ASSESSEES FUNDS ARE BLOCKED IN THE SHARES OF SUBSIDIARY COMPANY INCOME FROM WHICH IS EXEMPT. 2. THE FIRST ISSUE IS DEDUCTION CLAIMED BY THE ASSESSEE AS A DEVELOPER U/S. 80IA(4) OF THE INCOME - TAX ACT AND THESE ISSUES ARE ARISES FROM GROUND NOS. 1 TO 5. THE BRIEFLY STATED FACTS ARE AS UNDER. AS REVEALED FROM THE ORDERS OF THE AUTHORITY BELOW THE ASSESSEE IS A PVT. LTD. COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION OF INFRASTRUCTURE FACILITIES SUCH AS ROADWAYS WATER SUPPLY SCHEMES AND WATER T REATMENT SYSTEMS IRRIGATION PROJECTS ETC. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y. 2007 - 08 IN WHICH THE ASSESSEE CLAIMED THE DEDUCTION U/S. 80IA(4) TO THE EXTENT OF RS.3 37 89 937/ - . THE ASSESSING OFFICER HAS OBSERVED THAT THE DEDUCTION U/S. 80IA(4) IS AVAILABLE TO ANY ENTERPRISE CARR YING ON THE BUSINESS OF DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPING OPERATING AND MAINTAINING OF AN INFRASTRUCTURE FACILITY. THE ASSESSING OFFICER GAVE THE REFERENCE OF THE PRECEDING YEARS AND REJECTE D THE CLAIM OF THE ASSESSEE. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. 3 ITA NOS. 1748 & 1751/PN/2012 LAXMI CIVIL ENGG. SERVICES PVT. LTD. KOLHAPUR CIT(A) AND LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE F OLLOWING THE DECISION O N THIS ISSUE BY THE ITAT PUNE IN ASSESSEES OWN CASE FOR THE A.YS. 2003 - 04 2004 - 05 2005 - 06 AND 2 006 - 07 BEING ITA NOS. 766/PN/2009 254/PN/2008 431/PN/2007 AND 435/PN/2007. THE LD. CIT(A) ALSO RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF ABG HEAVY ENGG. LTD. VS. CIT (2010) 37 DTR (BOM) 233. THE OPERATIVE PART OF THE ORD ER OF LD. CIT(A) IS AS UNDER: I HAVE PERUSED THE SUBMISSION OF THE APPELLANT AND RELEVANT ORDER OF THE HON'BLE TRIBUNAL. I FIND THAT THE DISALLOWANCE OF DEDUCTION U/S. 80IA(4) OF THE ACT MADE BY THE A.O. FOR A. Y 2003 - 04 TO 2006 - 07 WHICH WAS CONFIRMED BY CIT(A) WAS ALLOWED BY HON'BLE ITAT PUNE BENCH PUNE IN FAVOUR OF THE APPELLANT IN THE ABOVE REFERRED ORDER OF THE HON'BLE TRIBUNAL. WHILE DECIDING THE ISSUE THE HON'BLE TRIBUNAL RELIED ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT PRONOUNCED ON 15/02/20 10 IN THE CASE OF ABG HEAVY ENGG LTD REPORTED IN 37 DTR (BOM) 233. 1 FIND THAT THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OR NATURE OF THE BUSINESS CARRIED ON BY THE APPELLANT FOR THE YEAR UNDER CONSIDERATION AS WAS FOR THE A. Y. 2003 - 04 TO A. Y. 20 06 - 07. THE HON'BLE MP HIGH COURT IN THE CASE OF AGARWAL WAREHOUSING AND LEASING LTD V/S CIT 257 ITR 235 HELD THAT ORDERS PASSED BY A TRIBUNAL ARE BINDING ON ALL AUTHORITIES FUNCTIONING UNDER THE JURISDICTION OF THE TRIBUNAL. ACCORDINGLY BY RESPECTFULLY FOLLOWING THE JUDGMENTS OF THE JURISDICTIONAL HIGH COURT AND TRIBUNAL I HOLD THAT THE A.O. WAS NOT JUSTIFIED IN DENYING THE APPELLANT'S CLAIM OF DEDUCTION U/S 80IA(4) OF THE ACT . IN THE RESULT THE CLAIM OF THE APPELLANT U/S 80IA(4) OF THE ACT FOR THE Y EAR UNDER CONSIDERATION IS ALLOWED. THE APPELLANT GETS RELIEF OF RS.3 37 89 937/ - . ACCORDINGLY THE GROUND OF APPEAL NO. 1 STANDS ALLOWED IN FAVOUR OF APPELLANT. NOW THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES. WE FIND THAT IN THE PRECEDING YEARS AS NOTED HERE - IN - ABOVE THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL AND THERE IS NO CHANGE IN THE FACTS. THE ASSESSEE HAS FILED THE COPY OF THE TRIBUNAL S ORDER WHICH IS PLACED ON RECORD. WE 4 ITA NOS. 1748 & 1751/PN/2012 LAXMI CIVIL ENGG. SERVICES PVT. LTD. KOLHAPUR THEREFORE FOLLO WING THE DECISION OF THIS TRIBUNAL ON THIS ISSUE IN ASSESSEES OWN CASE FOR THE A.YS. 2003 - 04 2004 - 05 2005 - 06 AND 2006 - 07 WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUND NOS. 1 TO 5. 4. SO FAR AS GROUND NO. 6 IS CONCERNED THE GRIEVANCE OF THE ASSESSEE IS DELETING THE ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC. 14A OF THE INCOME - TAX ACT TO THE EXTENT OF RS.3 00 558/ - . THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE COMPANY HAS INVESTED RS.90 00 000/ - IN TH E SHARES OF M/S. DIMENSION CONSTRUCTION PVT. LTD. THE ASSESSING OFFICER SOUGHT THE EXPLANATION OF THE ASSESSEE. THE ASSESSEE STATED THAT THE SAID COMPANY IS A SUBSIDIARY OF THE ASSESSEE COMPANY AND T HE INVESTMENT MADE BY THE ASSESSEE COMPANY IS FOR THE P URPOSE OF BUSINESS AND HENCE WILL NOT COME WITH IN THE PURVIEW OF SEC. 14A. THE ASSESSEE ALSO CONTENDED THAT THE INVESTMENT TO THE EXTENT OF RS.90 00 000/ - IS OUT OF NON - INTEREST BEARING FUNDS AS THE ASSESSEE IS HAVING SHARE CAPITAL OF RS. 1 00 00 000/ - AN D R ESERVE S & S URPLUS ARE TO THE EXTENT OF RS .13 76 57 433/ - . T HE ASSESSEE ALSO CONTENDED THAT NO TAX FREE INCOME IS EARNED BY THE ASSESSEE ON THE SAID INVESTMENT. THE ASSESSING OFFICER WAS NOT IMPRESSED WITH THE EXPLANATION OF THE ASSESSEE. HE HAS OBSER VED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAS DEBITED THE INTEREST AND FINANCIAL CHARGES TO THE EXTENT OF RS. 2 29 51 281/ - WHICH CONSISTS OF INTEREST PAYMENT OF RS.1 85 16 416/ - . IN THE OPINION OF THE ASSESSING OFFICER IF THE ABOVE FUNDS WERE UTILIZED FOR REPAYMENT OF THE BORROWED FUNDS THE INTEREST BURDEN OF THE COMPANY WOULD HAVE REDUCED PROPORTIONATELY. THE ASSESSING OFFICER THEREFORE INVOKED THE PROVISIONS OF SEC. 14A R.W. RULE 8D OF THE I.T. RULES 1962 WORKED OUT THE DISALL OWANCE AT RS.3 00 558/ - AND THE PROFITS OF THE COMPANY WOULD HAVE SHOWN INCREASED FIGURES. AS PER THE FORMULA GIVEN IN PARA NO. 8.2 5 ITA NOS. 1748 & 1751/PN/2012 LAXMI CIVIL ENGG. SERVICES PVT. LTD. KOLHAPUR IN THE ASSESSMENT ORDER THE ASSESSING OFFICER WORKED OUT DISALLOWANCE U/S. 14A. T HE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE THE ASSESSING OFFICER. THE LD. CIT(A) DELETED THE ADDITION. THE REASONS AND FINDINGS OF THE LD. CIT(A) ARE AS UNDER: I ALSO FIND THAT THE A. O. HAS WORKED OUT THE DISALLOWANCE U/S 14A OF THE ACT BY APPLYING THE PROVISIONS OF RULE 8 D OF THE I. T . RULES. THE HONTALE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG CO LTD. VS DCIT (2010) 328 ITR 81 (BOM) IT IS HELD BY THE HON'BLE COURT THAT 'THE PROVISIONS OF RULE 8D OF THE I. T. RULES HAVE BEEN INSERTED BY IT (FIFTH AMENDMENT) RULES 2008 WH ICH WERE NOTIFIED TO COME IN TO FORCE ON 24.3.2008. LAW WHICH WOULD APPLY TO AN ASSESSMENT YEAR IS THE LAW PREVAILING ON THE FIRST DAY OF APRIL. CONSEQUENTLY RULE 8 D IS APPLICABLE W.E.F. THE ASSESSMENT YEAR 2008 - 09 AND NOT RETROSPECTIVE.' IN VIEW OF THE ABOVE DECISION OF HON'BLE BOMBAY HIGH COURT IT IS CRYSTAL CLEAR THAT WHILE WORKING OUT THE DISALLOWANCE U/S 14A OF THE I. T. ACT RULE 8D CANNOT BE MADE APPLICABLE FOR THE A. Y.2007 - 08 AND EARLIER ASSESSMENT YEARS. IN THE PRESENT CASE THE ASSESSMENT YEAR INVOLVED IS A. Y. 2007 - 08 AND THEREFORE THE A. O. WAS NOT JUSTIFIED IN APPLYING THE RULE 8D OF THE I. T. RULES FOR WORKING OUT THE DISALLOWANCE U/S 14A OF THE ACT. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. ADMITTEDLY RULE 8D OF THE I.T. RULES IS NOT APPLICABLE FOR THE A.Y. 2008 - 09 AND THIS LEGAL P OSITION HAS BEEN CLARIFIED BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. VS. DCIT (2010) 328 ITR 81 (BOM). NOW TH E NEXT QUESTION IS WHETHER THERE ANY JUSTIFICATION TO APPLY SEC. 14A ON THE FACTS ON THIS PARTICULAR CASE. AS PER THE RECORD THE ASSESSEES INTEREST FREE FUNDS ARE MORE THAN THE INVESTMENT MADE IN THE SHARES OF THE SUBSIDIES. WE THEREFORE CONCUR WITH THE FINDING OF THE LD. CIT(A) THAT THERE IS NO JUSTIFICATION FOR MAKING THE DISALLOWANCE AT LEAST IN THIS YEAR BY INVOKING SEC. 14A OF THE ACT. ACCORDINGLY GROUND NO. 6 IS DISMISSED. 6 ITA NOS. 1748 & 1751/PN/2012 LAXMI CIVIL ENGG. SERVICES PVT. LTD. KOLHAPUR 6. NOW WE TAKE UP ASSESSEES APPEAL. THE ASSESSEE HAS TAKEN THE FOLL OWING GROUND IN THE APPEAL: 1. IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE CIT (APPEALS) HAS ERRED BOTH THE FACTS AS WELL AS IN LAW IN CONFIRMING DISALLOWANCE ON ADHOC BASIS A SUM OF RS.10 50 000/ - (I.E. RS.4 50 000/ - OUT OF DIESEL MATERIAL PURCHAS E RS.4 50 000/ - OUT OF LABOUR AND RS.1 50 000/ - OUT OF MATERIALS). THE SAME MAY PLEASE BE ALLOWED IN FULL. 7. THE ISSUE IS IN RESPECT OF THE ADDITIONS MADE BY THE ASSESSING OFFICER BY DISALLOWING THE PART OF THE EXP ENDITURE CLAIMED BY THE ASSESSEE AS UN DER: S. NO. PARTICULARS AMOUNT (IN RS.) DISALLOWANCE (IN RS.) 1 DIESEL MATERIAL PURCHASE 1 61 77 050/ - 4 50 000/ - 2 LABOUR 2 40 53 975/ - 4 50 000/ - 3 MATERIALS 24 90 97 890/ - 1 50 000/ - TOTAL 10 50 000/ - 8. THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE REASON THAT THE ASSESSEE COULD NOT JUSTIFY THE SAID CLAIM OF EXPENDITURE IN FULL. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT(A) BUT WITHOUT SUCCESS. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER OF THE LD. CIT(A) . LD. CIT( A) CONFIRMED THE ADDITIONS BY GIVING FOLLOWING REASONS: I FIND THAT THOUGH THE ADDITION MADE BY THE A.O. WAS ON AD HOC BASIS WITHOUT SPECIFYING ANY DEFECTS IN THE BOOKS OF ACCOUNT IT IS ALSO SEEN THAT THE APPELLANT ADMITTED THAT HE COULD NOT SUBSTANT IATE EACH & EVERY VOUCHERS/BILLS MADE BY A.O. ON TEST CHECK BASIS AND THE APPELLANT HAS AGREED TO A DISALLOWANCE AS DEEMED FIT BY THE A.O. HAVING ACQUIESCED TO SUITABLE QUANTUM OF DISALLOWANCE WITHOUT SPECIFYING THE PARAMETERS TO DETERMINE THE APPROPRIATE NESS OF THE A.O.S DECISIONS THE APPELLANT CANNOT TURN AROUND AND START PICKING HOLES IN THE ASSESSING OFFICERS DECISION. 7 ITA NOS. 1748 & 1751/PN/2012 LAXMI CIVIL ENGG. SERVICES PVT. LTD. KOLHAPUR MOREOVER NOTHING HAS BEEN PRODUCED IN APPELLATE STAGE BEFORE ME TO JUSTIFY ASSAILING OF DISALLOWANCES. THE FACT REMAINS THAT THE APPELLANT DID NOT HAVE THE NECESSARY VOUCHERS OR BILLS WHICH WOULD SUPPORT ALL THE EXPENSES CLAIMED UNDER THESE HEADS. UNDER THE CIRCUMSTANCES THIS GROUND OF APPEAL IS DISMISSED AND DECIDED AGAINST THE APPELLANT . 10. THERE IS NO DISPUTE THAT THE DISAL LOWANCES ARE MADE ON AD HOC BASIS. THE LEARNED COUNSEL SUBMITS THAT EVEN IF THE DISALLOWANCES ARE MADE THEN TO THAT EXTENT THE BUSINESS PROFIT OF THE ASSESSEE IS INCREASED AND HENCE THE ASSESSEE IS ENTITLED FOR THE DEDUCTION U/S. 80IA(4) ON THE SAID ADDI TION. THE LEARNED COUNSEL RELIED ON THE DECISION IN SUPPORT OF THE SAID PLEA (I) CIT VS. GEM PLUS JEWELLERY INDIA LTD. 233 CTR (BOM) 248 (II) ITO VS. KEVAL CONSTRUCTION (2013) 33 TAXMANN.COM 277( AHD ) AND (III) SHRI MAHAVIR NAGARI SAHAKARI PAT SANSTHA LT D. VS. DY. CIT 74 TTJ 793. 11. WE FIND FORCE IN THE ARGUMENT OF THE LEARNED COUNSEL. ADMITTEDLY THE ADDITIONS ARE MADE BY MAKING THE DISALLOWANCE OF THE EXPENDITURE TO THE PROFIT OF THE ASSESSEE UNDERTAKING . I N THE CASE OF GEM PLUS JEWELLERY INDIA LTD. (SUPRA) THE ISSUE WAS IN RESPECT OF COMPUTATION OF THE PROFIT S AND GAINS DERIVED FROM EXPORT FOR THE PURPOSE DETERMINED THE EX EMPTION U/S. 10A. IN THE SAID CASE DISALLOWANCE OF THE PF/ESIC PAYMENT S HAD BEEN MADE BECAUSE OF THE STATUTORY PROVISIONS I.E. SEC. 43B WHICH WAS IN RESPECT OF EMPLOYE RS CONTRIBUTION AND SEC.36(1)(V) R.W.S. 2(24) (X) I N THE CASE OF EMPLOYEE S CONTRIBUTION WHICH HAVE BEEN DEEMED TO BE THE ASSESSEE S INCOME . T HE HON'BLE HIGH COURT HELD THAT THE DISALLOWANCE W AS ADD ED BACK BY THE A SSESSING OFFICER WHICH HAS INCREASED IN THE BUSINESS PROFIT S OF THE ASSESSEE AND EX EMPTION U/S. 10A IS ALLOWABLE WITH REFERENCE TO SUCH ENHANCED INCOME. WE THEREFORE FOLLOWING THE PRINCIPLES LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD. (SUPRA) ALLOW THE PLEA OF THE ASSESSEE AND DIRECT 8 ITA NOS. 1748 & 1751/PN/2012 LAXMI CIVIL ENGG. SERVICES PVT. LTD. KOLHAPUR THE ASSESSING OFFICER TO CONSIDER THE SAID ADDITION FOR THE PURPOSE OF COMPUTING THE DEDUCTI O N U/S. 80IA(4) OF THE ACT. 12. IN THE RESULT THE REVENUES APPEAL IS DISMISSED AND THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 - 10 - 20 1 3 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE DATED : 30 TH OCTOBER 20 1 3 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) KOLHAPUR 4 THE CIT KOLHAPUR 5 THE DR ITAT A BENCH PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE